U.S. Century Bank revised some terms of its acquisition by C1 Bank, including the discount on its TARP repayment, and set a new date for a shareholder meeting.

U.S. Century Bank also indicated it expects a loss in the fourth quarter.

The shareholders of the Doral-based bank, the largest “undercapitalized” bank in the nation, will vote on the proposed merger with St. Petersburg-based C1 Bank on Nov. 27 in the late afternoon. The deal still requires regulatory approval.

U.S. Century Bank President and CEO Carlos Davila said he’s confident it will close before the Dec. 31 deadline in the merger agreement.

The latest proposal calls for a $6.27 million TARP payment to the Treasury, up from an initial $5 million proposal that the agency rejected.

U.S. Century received $50.24 million from the Troubled Asset Relief Program (TARP) in 2009. The latest proposal indicates taxpayers would lose nearly $44 million, according to a revised shareholder proxy obtained by the Business Journal from confidential sources.

The 87.5 percent discount now proposed for U.S. Century Bank’s TARP repayment would be the highest percentage on record for a bank acquisition deal.

The highest percentage TARP discount on a bank sale so far has been 68 percent, which was obtained by Coral Gables-based Capital Bank Financial Corp. to buy Naples-based TIB Financial Corp. in 2010, according to the Special Inspector General of TARP. Most discounts for acquisitions are far less than that.

“We have had positive dialog with Treasury,” Davila said. “The parties are working towards a potential resolution.”

Davila declined to say whether C1 Bank would give Treasury more cash if it demanded a larger TARP repayment, but he said U.S. Century Bank had a contingency plan in case the merger fell through. He declined to reveal what that plan was.

C1 Bank CEO Trevor Burgess couldn’t be reached for comment. His bank has promised to contribute $100 million in capital to the new institution after the merger.

In the Nov. 16 print edition, the Business Journal questioned whether Treasury’s due diligence on U.S. Century Bank missed major red flags before it awarded the bank the largest TARP investment in Florida.

The amended merger agreement also reduces the compensation for U.S. Century Bank shareholders to $2.5 million, or about 1.7 cents on the dollar based on the $150.1 million in capital the bank raised since it was founded in 2002. That’s down from $3 million in the original merger agreement, because of the increase in C1 Bank’s repayment of TARP.

Some shareholders are upset by the low return on investment. Two U.S. Century Bank shareholders have sued the bank and sent a letter demanding that it investigate its current and former directors for alleged mismanagement and improper insider dealings.

The agreement was amended to give U.S. Century Bank until Nov. 9 to show C1 Bank that it amended the lease agreement for its Doral headquarters with more favorable terms, including the option to terminate the lease without penalty within six months after the merger.

Its headquarters was formerly owned by a company led by Sergio Pino, a former director of U.S. Century Bank, but Pino sold the building to Nelson Albareda’s NGF Properties in October – two months after the merger announcement. The Business Journal is seeking comment from Albareda about whether he might agree to C1's request.

Davila, who just joined the bank in August, said he hasn’t gone back to view the terms of the insider loans at the time they were made, but their terms are at current market rates and conditions today. He said the bank holds reserves for potential loan losses on insider loans and that some of them were modified in “troubled debt restructuring.”

The bank hasn’t taken a loss on those loans and the modifications given were consistent with what other borrowers have received from the bank, he added.

Davila said Armando Guerra has continued to sit in on its special asset and loan committee meetings since resigning as a director in late September. A founding director of U.S. Century Bank, Guerra is VP of Sedano’s Supermarket and a real estate developer who is facing a foreclosure lawsuit from Bank of America over a Miami Beach project.

Davila said the board needs to consult with a real estate expert in those meetings because its four members don’t have such experience. Regulators are OK with Guerra sitting in and he’s not paid for that, Davila added.

U.S. Century Bank has submitted an application with regulators to add a fifth board member, one who is independent, Davila said.

Loss expected in fourth quarter

Although U.S. Century Bank turned a moderate profit in the third quarter, it expects to suffer a loss in the fourth quarter, according to its proxy. Based on its “historical financial performance” during the fourth quarters, the bank forecasts a loss in that period, but it expects it to be less severe than the $10.7 million it lost in the fourth quarter of 2011.

“The bank’s management believes that due to the bank’s continuing losses, the bank may be unlikely to return to profitability or to achieve the capital ratios required by our regulators without a substantial infusion of capital,” U.S. Century Bank stated in its proxy. “The bank’s continuing losses and inability to achieve our required capital ratios may result in further enforcement action against us by our regulators, including the possibility of regulatory intervention, if the merger is not completed.”

If regulators seize U.S. Century Bank, it’s unlikely that taxpayers would recover any of the TARP investment.

Davila said C1 Bank is committed to buying and recapitalizing U.S. Century Bank because it has a good group of core customers on the commercial lending side, including many loyal Hispanic small business owners, and an attractive branch network.